• In a contract of indemnity there are two parties i.e. indemnifier and indemnified. A contract of guarantee involves three parties i.e. creditor, principal debtor and surety.


• An indemnity is for reimbursement of a loss, while a guarantee is for security of the creditor.


• In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults.


• The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.

Contracts of Bailment and Pledge

A 'bailment' is the delivery of goods by one person to another for some purpose upon a contract that they shall, when the purpose is accomplished,be returned or disposed of according to the directions of the person delivering them. The person delivering the goods is called the 'bailor' and the person to whom the goods are delivered is called the 'bailee'. The examples of a contract of bailment are:- delivering a watch or radio for repair; leaving a car or scooter at a parking stand; leaving luggage in a cloak room; delivering gold to a goldsmith for making ornaments; leaving garments with a dry cleaner,etc. The essence of bailment is the transfer of possession. The ownership remains with the owner. There cannot be a bailment of immovable property.

A 'pledge' is a bailment of goods wherein the goods are delivered as a security for payment of a debt or performance of a promise.The bailor is called the 'pledgor' or 'pawnor' and the bailee is called the 'pledgee' or 'pawnee'. Thus, pledge is a special kind of bailment. Pledge can be made only of movable properties. In order to make the pledge legally valid it is essential that the pledgor has the legal right or title to retain the goods.

Difference between Bailment and Pledge:-

• Purpose:- A pledge is made for a specific purpose, while bailment can be made for any purpose.


• Property:- In bailment, the bailee gets only the possession of goods bailed. The ownership remains with the bailor. In the case of pledge, the pledgee acquires a special property in the goods pledged whereby he gets possession coupled with the power of sale, on default.


• Right of sale :- Bailee can exercise a lien on the goods bailed. He has no right of sale. But in case of a pledge, the pledge can sell the goods after due notice to pawner.

Contracts of Agency

An 'Agent' is a person employed to do any act or to represent another in dealings with third persons. The person who employs the agent and for whom such act is done,or who is so represented,is called the 'principal'. The relation between the agent and the principal is called 'Agency'. It is only when a person acts as a representative of the other in the creation,modification or termination of contractual obligations,between that order and third persons,that he is an agent. The essence of a contract of agency is the agent's representative capacity coupled with a power to affect the legal relations of the principal with third persons.

Contracts of agency are based on two important principles:-

• Whatever a person can do personally shall also be allowed to be done through an agent except in case of contracts involving personal services such as painting, marriage, singing, etc.


• He who does an act through a duly authorised agent does it by himself i.e. the acts of the agent are considered the acts of the principal.

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